The opening of borders continues enabling international traffic to increase once more thereby allowing more widebodies to re-enter service.
Lease rates for the newer widebodies are increasing by a modest amount not least due to the rise in interest rates. But with the public becoming used to providing relevant medical documentation concerning vaccination status the appetite for travel has been reinvigorated even if the staffing shortages continues to cause significant delays. The number of leased widebodies as of April 2022 in active service had decreased from the start of the year although the Russian invasion of Ukraine and the lockdowns in China contributed to the rise in storage levels. Operators are gearing up for a busy Northern Hemisphere summer season although crewing may be an issue.
Lease rentals are provided by The Aircraft Value Analysis Company (AVAC) www.aircraftvalues.net (for China www.aircraftvalues.com).
| Widebody Lease Rates (Dry) US$ ‘000s pm – April 2022 | |||
| Aircraft | Age | Rental | Trend Analysis |
| A300-600R | 1987-90
1991-97 |
30-50
35-60 |
Placing any lease rentals on the A300-600R has been difficult for a decade or more given that so few remain in service. However, the -600R provided Airbus with considerable experience in terms of offering a two-person cockpit and twin engines on a longer haul model. The -600R was in service before the B767-300ER. The issue though was that Airbus continued to assume that long haul was the preserve of four engined aircraft whereas Boeing was already fully embracing the concept of ETOPs. Being wedded to “four engines 4 long haul” ultimately cost Airbus billions given the failure of the A340-500 and -600 and the success of the B777. |
| A310-300H | 1985-89
1990-97 |
25-40
30-65 |
The market for the A310 dissipated a decade or more ago except that in some ways it remains very much at the forefront of the manufacturers future product line. The success of the A321neo provides an insight into how this segment of the market has become so important for both manufacturers. Boeing is essentially grappling with how to design a replacement for the A310. But for the A310 there is essentially no market. |
| A330-200 | 1998-02
2003-08e 2009-21e |
65-100
75-230 180-420 |
Even as the market recovers the demand for the A330-200 remains difficult. The type is being placed but only by virtue of low lease rentals. There are some 220 on operating leases representing a third of the fleet. Of these over a third are still in storage and this underlines just how far the international market has to go before traffic recovers to pre-Covid levels. There is substantive demand in some countries and regions, notably the U.S. The last year has been characterized by the perception that the demand in the U.S. is representative of a global recovery when this is clearly not the case. Even some of those A330-200s that are in service continue to be used for freighter operations or even ghost flights. The type is essentially no longer in production and the number of orders for the replacement -800 clearly shows that operators are moving to other seating capacities. The rates are therefore expected to show only a very modest improvement in the context of rising interest rates. There are some new operators seeking to take advantage of the gaps left open by contracting majors but again lease rentals are low and may even be on a power by the hour basis. |
| A330-300 | 1994-97
1998-02 2003-10e 2011-21e |
65-90
80-140 125-300 260-470 |
Over a third of the A330-300 leased fleet of 250 aircraft are still in storage. Again, this illustrates that the international market has a long way to go. A large number of -300s are located in Asia where restrictions are rife. The problem for Asian operators is that not only are borders gradually opening up but that there sometimes exists a mediocre vaccination program. There exists some anti-vaccination sentiment among the older generation and this is creating problems in containing the virus and reducing the severity of the illness. Hong Kong is a case in point. The gateways in Asia are crucial for A330 operations and when these open up fully once more then lease rentals may improve. The issue for the lessors is that the A330-900 is much more efficient and in an era of high fuel prices then operators will need an incentive to lease the -300. For lessors, the conversion to freighter will perhaps provide a more profitable solution for unwanted aircraft in the coming years. |
| A330-900 | 2018-22 | 460-750 | The rates for the -900 have increased by a marginal amount which reflects the emphasis on more fuel efficient aircraft. The production rates of the -900 are still below pre-pandemic levels and orders are slow in forthcoming. Yet, there are nearly 50 active leased units and only ten in storage. A number were used as preighters, and this continues to be an option for some. The rates for the -900 are expected to improve in the next two quarters as the international market opens up. |
| A340-300H | 1993-97
1998-02 2003-08e |
50-90
70-100 80-110 |
The lease rentals of the A340-300 is anything are lower than they were before and finding lessees beyond short term power by the hour deals is difficult. The type has long since been removed from front line service. |
| A340-600 | 2002-10 | 70-160 | The type may have some relevance in a low fuel environment but that is not today. |
| A350-900 | 2014-22 | 560-960 | The first two months of 2022 were not good for the -900 with five cancellations being records and no new orders. There remain over 300 on backlog but only two were delivered during January and February 2022. Production rates are set to increase but operators are loath to add capacity too quickly preferring instead to ensure that the existing fleet is fully utilized. There may be 120 leased -900s in active service but there are also another 50 that are in storage. This significant number of leased aircraft in storage makes it difficult for the lessors to impose higher rates. The -900 is well placed to be most used by the operators offering good economics. The very long haul capability of the -900ULR means that operators can offer direct services from say Singapore to New York assuming that SIA is able to serve the market. There may be an issue in placing too much of a premium on the aircraft as there are few operators who will wish to fully utilize such capability. This means that the -900ULR may be subsequently used as a normal -900 but at least the hour to cycle ratio will be very high suggesting a longer service life and lower maintenance costs associated with engine overhauls. |
| A350-1000 | 2018-22 | 750-1150 | There is the continued issue of contested quality in relation to the Qatar fleet. At present this is not putting off operators from acquiring the type. The aircraft is well placed to replace the B777-300ER as well as four engined types. The lease rentals of the type have improved slightly. The issue going forward is in terms of load factors. International load factors remain relatively low and where an operator has the option to fly a -900 instead of a -1000 it will do so. As the market recovery gathers pace it can be expected that the rates for the -100- will rise by a significant amount. |
| A380 | 2006-21 | 200-600 | Two years ago, there were perhaps only one or two A380s in service. Today there are 90 in service albeit with another 146 in storage. However, there are indications that others will be entering service once again given the increase in traffic and delay to the B777-9. Unfortunately, the very strong market that was evident before Covid did not elicit much interest from the used market. The much lower pricing of today may see some interest but operating an A380 is no easy task. Lease rates are therefore not considered to have changed and may have actually fallen. Many A380s are on finance or quasi operating leases which will see investors being virtually paid out at the end of a 12-year lease based on $2 million per month. Combined with End of Lease Compensation amounts, the A380 will probably have generated some profit even without any meaningful residual value being evident. |
| B747-400 | 1989-95
1996-02 |
40-70
60-90 |
The -400 is no longer relevant to the wider market and this means that the lease rentals can be virtually whatever a prospective lessee wishes it to be. Perhaps Russia was a primary target but Putin’s War has closed this avenue. After the current lessees have finished with the aircraft it is difficult to see how the type will be moved to other operators except via a power by the hour arrangement. |
| B747-8I | 2010-17 | 220-350 | There is little interest in the -8I and even conversion to freighter does not seem to be an option. A conversion to a VIP configuration is a possibility. Lease rentals have actually fallen again. Power by the hour or ACMI arrangements will likely be the principal means of disposal assuming that there is any interest. |
| B767-200ER | 1985-92 | 40-55 | The B767-200ER has little to commend except perhaps as a candidate for freighter conversion. The type was only ever produced in small numbers and leasing has been sporadic. Rates fell by more than 30 percent due to Covid. |
| B767-300 | 1986-90
1990-98 |
40-55
45-60 |
The type has long since lost its relevance and lease rentals have been at rock bottom for many years with the -300ER much more sought after. |
| B767-300ER | 1988-95
1996-03 |
55-90
70-120 |
The demand for the freighter version is strong but the passenger version is less attractive. There are only 42 active -300ERs on operating leases with 18 being in storage. Lessors have turning their passenger aircraft into freighters for years and will continue to do so for the next few years given the demand. |
| B767-400 | 2000-02 | 75-100 | The -400 operates in the wings of the market given that few were built. The lease rentals have inevitably been impacted with no improvement expected. |
| B777-200 | 1995-00 | 60-100 | The -200 previously hung onto the coat tails of the -200ER but for a decade or more the reality of its marginalization has been all too apparent. |
| B777-200ER | 1996-01
2002-12 |
60-115
100-180 |
There is little to commend the -200ER. The type has long since passed the point of no return and lease rentals collapsed before Covid. The lessors of the type will seek lease extensions knowing that there will be little interest in the wider market.. |
| B777-300 | 1998-06 | 80-150 | The market for the -300 has always been difficult. ANA, Cathay, JAL and Korean are the major operators. Lease rentals have been suffering for years and they have fallen still further. |
| B777-300ER | 2004-10
2011-21 |
170-320
240-750 |
There are a great many -300ERs on operating lease – more than 220 are in active service on operating leases. Some 56 leased aircraft are in storage – more than four months ago. As the international sector opens up then the -300ER remains a viable leasing tool but there has to be a recognition that changes have occurred, and this means that lower lease rentals have to be acknowledged. The delay to the B777-9 is providing some solace as is the retirement of the A380s and B747-400s but the ending of production and the move to the A350-1000 and B787-10 cannot be ignored. There is concern that the cost of overhauling the engines may be dissuading second tier operators from acquiring the aircraft. The very size of the aircraft also does not necessarily lend itself to smaller operators even on the basis of lower rentals. |
| B787-8 | 2010-22 | 280-570 | Despite the ongoing recovery in the market, the rates for the -8 have not moved. Even the hiatus in deliveries of new units has not helped. The first B787 variant was always expected to experience some issues with regard to the secondary market, particularly in view of the better economics of the -9. The A330-900 is also a very capable competitor. |
| B787-9 | 2014-22 | 530-880 | Although deliveries have been impacted by regulatory concerns, the increase in traffic is allowing operators to be bring the -9 back into service. Lease rentals have improved to some extent but remain well below pre-Covid levels. The effect of inflation will soon see further rises in rates. But once deliveries start again the used market may be less buoyant. The -9 has always been the favored variant because of its greater capacity and operating flexibility. |
| B787-10 | 2018-22 | 775-975 | The rates for the -10 have increased slightly as the type offers lower seat mile costs. However, the issue for operators remains load factors and it may be some time before loads return to pre-Covid levels notwithstanding the issues associated with staffing shortages. The issue of payload/range is ever present and this will come to a head when Boeing introduces a -10 with greater range. To a large extent, the re-engining of the B787 is beckoning with an entry into service date of around 2028 entirely possible. |
| Commentary reflects change from the last update to Widebody Rentals of December 2021. | |||
